March 05, 2011

Jobs? Forget jobs. They're gone for good and they're not coming back. We need Social Credit.

Everywhere you turn, the same cry is in the air: Jobs! We've got to get jobs back for people!

The shouters may have different remedies, but all have the same object: to eliminate unemployment, to restore jobs.

The liberals think we can do it by “stimulating” the economy with a “jump start” in the form of government spending, with large though temporary deficits. Paul Krugman will tell you on any day of the week that the stimulus applied thus far is too small, but all would be well if we just made it bigger.

The Republicans and the Tea Baggers (are they any different?) would have us cut government spending and taxes, get the government “off our back”, and let the Free Market do its work to restore the economy, and therefore jobs. The invisible hand will get us back our jobs.

They are all wrong. The jobs are gone, and they are not coming back.

Why? Two reasons: technology, and globalization. Both are inexorable trends, and both are killing our jobs.

Start with technology. I have been an engineer devoted to increasing human productivity for almost my entire career. In one way or another, this is what all engineers do, but I have been specifically devoted to developing tools and systems whose purpose is to multiply the productivity of workers using them.

When McCormick invented his reaper, it allowed one agricultural worker to do the work of six. The number of people needed to cultivate a field of wheat is determined by how many are needed to reap it once it becomes ripe. One farmer on a McCormick reaper did the work of six with scythes. Suddenly, five scythe-wielders could go off and take up a different line of work. One worker could produce enough wheat for the daily bread of all six.

When we started Camex in 1974 to build a new electronic Composition and Makeup system for newspaper composing rooms, we estimated that each worker using our computer graphic workstation would be able to do the work of six compositors using the then-conventional means for manual composition and make up of ads and pages. Once that productivity multiple was proven in practice, our systems were installed in composing rooms all over the world. The workers had nothing to fear; their strong unions had negotiated settlements with publishers which allowed using the technology only if no one was laid off. The labor displacement on which we depended therefore came into play only as older workers retired. Since the work force was aging, we built a successful business. But as one third-generation compositor accurately foresaw, his son could never follow in his footsteps.

I have always thought of the twentieth century as one of progress, best signified by the fact that in 1900 nine out of ten people were farmers, whereas by 2000 fewer than 10% of Americans worked on farms. At the beginning of the century, growing food for 10 required 9 people farming; by 2000, one person on the farm could produce food for all 10 plus additional food for export.

Where did all those farmers go? Many went to work in manufacturing, on the assembly lines once disdained as dehumanizing (e.g., by Charlie Chaplin in “Modern Times”). When the cotton picking machine came along, many Southern field workers were given one-way bus tickets to Detroit.

In the next generation, people moved into the office as “knowledge workers”, manipulating symbols rather than wrenches. All, including manufacturing workers, could aspire to membership in the “middle class”. They could own a house, a car, a washing machine and a television set, and send their kids to school to do better than they themselves had done.

These are the jobs we are supposed to “get back”. Assembly line jobs in manufacturing. Office jobs.

But they are not coming back. Ever. Because, as each example above shows, technology enables improved labor productivity via increased capital investment. A McCormick reaper cost a lot more than a scythe. A cotton picking machine cost much more than a field hand's wages. A Camex system cost much more than the equipment used previously by compositors. New technology lets you improve labor productivity by expending more capital costs in order to cut labor costs – by bumping up “capex” (capital expense) to reduce “opex”(operating expense, mostly labor costs). And, we have organized society so the rewards for increased labor productivity go not to the workers whose labor is more productive, but to the owners of the capital used to achieve that increased labor productivity. This has been true for more than 30 years.

I first read the term “dark factory” in a trade magazine last year. Its implications took a while to sink in. A dark factory is one run entirely by robots, and a new term was needed for a phenomenon we are just beginning to see. As more and more robots are installed in a factory to achieve yet higher and higher worker productivity, the time comes when the last robot is slid into place. At that point, there is no longer any need for any workers in the factory at all, so the lights can be turned out: we have a “dark factory”.

Think about what this means. The factory is all capex, no opex – at least none for labor. There is no need for workers in the manufacturing operation any more. But unlike the Southern planters, we can't just buy these suddenly unusable workers a one-way bus ticket to Detroit, where they can get employed in a productive job in a new field. There is nothing anymore they can do that is worth what they need to live on. They have been replaced by machines.

And the labor movement? What is it going to do about a dark factory? Call a strike of the factory workers? There aren't any left. Technology is doing away with the need for workers, just as 100 years ago it eliminated the need for horses for transportation.

But what about the factory's output? Who will buy it? Not clear. If the GDP all goes to the top 1% and their hangers-on and attendants, maybe they can buy all the output. The Financial Times reported recently that WalMart profits were disappointing, but luxury goods suppliers were flourishing. Leaving the bottom 99% without the income to buy stuff flaunted by the top 1% is social dynamite, but that's where "dark factories" are taking us.

And then there is globalization, perhaps best explained by a fable.

Imagine a town in Indiana whose economy is based on a local factory that makes toaster ovens. Everybody in town either works at the factory or works to supply goods and services to those employed there. Then one day someone discovers a cave in West Virginia that has an apparently endless supply of toaster ovens in it, available for free: an act of of God. What should the country do? Seal the cave back up, so the Indiana town can survive? Or does it see that free toaster ovens are good for the country, therefore keeps the cave open as a source of supply, and provides assistance so the town in Indiana can find another contribution it can make to the economy? Obviously, in an ideal world, the latter, since it provides the greatest benefit to the greatest number.

But now suppose the cave is found not in West Virginia but somewhere in South East Asia. Does that make any difference? Of course not – those toaster ovens are now available to everyone in the country at a much lower price than those made in Indiana, so we should allow them in without a tariff designed to make them as costly as those made in Indiana. So the Indiana town must still find something else to do, just as Adam Smith said they must.

But wait a minute, this just in: someone has worked their way to the back of the cave and found that the toaster ovens were not placed there by an act of God, but instead are being made by child slaves, working under inhumane conditions.

What then? Do we still take their “work product” because it is so much cheaper than that made in Indiana? As it happens, this is not a hypothetical question. It is what “globalization” means in fact. We can buy toaster ovens made in Asia by workers being paid slave wages working in inhumane conditions, and boy are they cheap. Do we do this? You bet we do. Check out what toaster ovens cost at WalMart, and where they are made.

So between dark factories in the US and slave wages in the “low labor cost” parts of the world, it is illusory to think that anything can restore the “jobs” we once disdained but now want back. It won't happen.

In part because the decision as to a way forward is in the hands not of those who have been displaced from the workforce or those still in it, but by the oligarchs who have bought the politicians of both parties. And they own both the dark factories and the businesses engaged in “global trade”. They are doing very nicely, thank you. They have no reason to see any need for change in the system, and they control it.

But even if we had a “Cairo moment” here in the US and won a government “of, by and for the people” instead of the oligarchy we have now, what should we do? Impose high tariffs, ban dark factories and robots, and get our jobs back? No, there is another way, one that does not require such an anti-technology, Luddite move.

We must first realize that for many people in the society, there is no longer anything economically worthwhile for them to do. The dark and almost-dark factories can churn out enough stuff for everyone, along with imports from “low wage” parts of the world.

How then can the resultant GDP all be bought? By seeing to it that everyone in the society participates in its consumption just by virtue of being here, which entitles them to a share of society's output. This is not a “social safety net”, it is that dreaded thing, an “entitlement”. It is a sharing of production that everyone is entitled to by virtue of their being a part of the social fabric that makes that production possible. It is just like the oil bounty passed out by the State of Alaska to every inhabitant, on the grounds that the oil “belongs to everyone in the state” Even Sarah Palin favors that bounty.

What is such sharing of a bounty called? Social Credit. The idea has been around for a long time. Even Richard Nixon favored a version of it. In the US, it would call for granting to everyone a sum capable of sustaining existence, something like $1,500 a month. It would be granted to everyone, not just retirees, or those who can prove they are “in need”. The economy would still be open to entrepreneurship and the “free market”. You could climb as high as you like, but you will see a strongly progressive income tax enforced without the shameless loopholes we have now.

Yes, there will be a continuous “redistribution” of wealth, from those at the top to those at the bottom. Without such redistribution, wealth gets concentrated into fewer and fewer hands, and the system collapses.

Why should even those currently at the top favor this? Because it can be stable, as our present system is not, as evidenced by the Global Financial Collapse, which shows no sign of ending. As much as those at the top dislike taxation, I am sure they would prefer it to finding their head on a pike, which is the alternative we are heading for now.

So forget jobs. They are not coming back. Social Credit is what we need. Think of it: a stable society with no extreme poverty, where GNP is high, inequality is very much present but far lower than it is now, and anyone can freely engage their animal spirits to improve their lot. Isn't this what everyone, left right and center, says they want?

Comments

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This sounds roughly like the plot to 'Player Piano'. Now how did that book end again? Still a good post, it says a lot of the things I've been trying to tell people over the last five years in a much more concise manner. And it doesn't need the 'King of England and the Crank' allegory to work.

“If you buy a $100 griddle, the price tag for the griddle will say $100. When you get a receipt for your purchase that receipt will itemized to show that $77 of the total cost will be retained by the retailer and $23 will be sent to the federal government as the FairTax. The total is $100, just as